The Value of Employer Reputation in the Absence of Contract Enforcement: A Randomized Experiment

In two experiments, we examine the effects of employer reputation in an online labor market in which employers may decline to pay workers while keeping the work product. In the first experiment, a blinded worker performs tasks posted by employers with good, bad, or no online reputations. Results confirm that reputation provides information on task completion time and nonpayment, and thereby effective wage rates. In the second experiment, we create multiple employer identities endowed with different exogenously introduced reputations. We find that employers with good reputations attract workers at nearly twice the rate as those with bad reputations with no discernible difference in quality. We interpret these results through the lens of an equilibrium search model in which the threat of a bad reputation deters employers from the abuse of authority even in the absence of contractual protections of workers.